RIM Tumbles 19% on Cash Concerns

By CHIP CUMMINS

TORONTO—Investors appear to be betting Research In Motion Ltd. won't have enough financial firepower to successfully launch its new mobile operating system as a stand-alone company.

Research in Motion posts big loss and delays BlackBerry 10 operating system sending shares plunging in after-hours trading. MarketWatch technology editor Dan Gallagher has the details. Photo: AP.

The company's shares fell 19% to $7.39 on Friday, driving the company's market capitalization to $3.81 billion, less than 1/20th of its peak value in 2008.

The selloff came a day after a series of ugly announcements that included a delay in the debut of its next BlackBerry phone, a larger-than-expected loss and as many as 5,000 layoffs.

RIM said it is now expecting to start selling its next phone, using the coming BlackBerry 10 operating system, in early 2013.

Meanwhile, both profit margins and sales volumes continue to erode on its existing product line. RIM has also taken a series of recent charges related to unsold BlackBerrys and PlayBook tablets stacking up in warehouses.

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All that has investors and analysts worried the company will soon start to burn through its still-sizeable cash cushion. RIM said it had $2.2 billion in cash at the start of the month. It is debt free, however, and has access to a large credit line with its banks.

RIM's shares are now below what several analysts consider the company's book value—the value of its individual assets if they were to be sold off separately.

Stripping out its cash, investors are now essentially valuing the rest of the company's global operations, brands and other assets at a mere $1.6 billion. A big question mark is the value of the company's patents, which analysts have pegged anywhere between $2 billion and $5 billion.

The selling Friday ratchets up pressure on the company to explore radical strategic shifts that it has so far signaled it doesn't yet see as a priority, such as a sale of the company.

Chief Executive Thorsten Heins declined to discuss details of the company's strategic review Thursday, saying only that many options were still open to the board.

Bank of America-Merrill Lynch analysts in a Friday morning note said they do "not believe RIM will be able to build its own ecosystem" to challenge smartphone market leaders Apple Inc. and Google Inc.'s Android, and new competition from upstart player Microsoft Corp.

In a statement, RIM said it disagreed with the assessment and expects "customers will be delighted by the quality, variety, and quantity of applications on the BlackBerry 10 platform."

Chief Financial Officer Brian Bidulka told analysts Thursday he expects cash levels to remain largely the same through the current quarter. But RIM is also in the middle of a massive restructuring, promising late Thursday to cut 5,000 jobs, or almost one third of its global workforce, by March.

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Mr. Bidulka said cash levels in the quarter could be impacted by the timing of some of those layoffs, forecasting restructuring costs for the fiscal year of some $350 million. RIM has also had to take several write offs for inventory build.

Amid falling BlackBerry sales, Mr. Bidulka said inventory management was a key focus for the company.

Write to Chip Cummins at chip.cummins@wsj.com

A version of this article appeared June 30, 2012, on page B3 in the U.S. edition of The Wall Street Journal, with the headline: RIM Tumbles 19% On Cash Concerns.